Infonomics and the Business of Free: A Recap of the NFAIS Webinar by
Abby Clobridge
Posted On July 8, 2014

Over the past decade of increased internet usage and reliance, consumers have come to expect—and demand—that information be free. This pervasive expectation has created a huge hurdle for information providers and is forcing dramatic changes in the information supply chain. Whereas the supply chain was once heavily controlled by publishers, aggregators, and professional information providers, we now have a free-for-all in which anyone can become a content creator. What does this mean for publishers and the information industry? As publishing/information industry expert, author, and speaker John J. Regazzi asked during a recent National Federation of Advanced Information Services (NFAIS) webinar, how do information companies need to think about creating value, generating profit, and providing increased value to information consumers? How do companies plan for and drive information services in this context?

NFAIS’ webinar, Infonomics and the Business of Free: Modern Value Creation for Information Services, which was based on Regazzi’s 2013 book of the same name, focused on these issues. Regazzi began the webinar by presenting an overview of why information is free. He opened with a case study of cinnamon, once a tightly controlled and highly valued commodity. Whoever controlled the production and distribution of cinnamon controlled its profits. But by 1796, a new strain was introduced and production spread. Supply was easily able to meet demands, an open and efficient distribution system emerged, and prices eventually dropped.

Changes in the Information Supply Chain

A similar pattern occurred within the information industry. As Regazzi explained, for centuries the information supply chain was straightforward: Authors produced information in the form of books and journals; publishers packaged, aggregated, sold, and distributed information; libraries (and individual consumers) selected and acquired information; and readers consumed information.

Now, Regazzi explained, we’re seeing a supply network with increased complexity. The last decade has proven that the internet is an effective and efficient distribution system for information. Technology has made it possible for anyone anywhere to become a publisher or information supplier, leading to mass production of content. The information supply chain, once tightly controlled by publishers, has been upended. Readers—or consumers—are facing what might be a bewildering complexity of choices and options in today’s environment, but their expectations have dramatically changed in light of these transformations to the supply chain.

The question of whether information ought to be free is outdated—as Regazzi noted, the market has long moved beyond this point. The reality is that in today’s environment, people expect most—if not all—information to be free. In fact, consumers’ expectations include the following four key characteristics:

1. Information is available on the web.2. Information is readily accessible on the web.3. Information on the web can be verified or has already been verified.4. Information is free.

The Necessity of New Business Models

In order to be successful, information providers must take into account the full range of consumers’ expectations, even if such expectations and perceptions are not accurate. These expectations are shifting how successful organizations in the information services industry are doing business. In addition, Regazzi credited two important concepts as serving as prime drivers of these changes: open source software and open access (OA). Regazzi explained that the open source philosophy replaces a trade secret model with a model in which anyone can contribute to software development, allowing users to determine which features to add and ultimately steering the direction of development. Similarly, Regazzi said that the philosophy behind OA is that all/most information should be free to view or read, and he suggested that OA advocates have enjoyed the most success in scholarly journal publishing. Instead of levying costs at the point of access, OA journal publishing is paid for in other ways, often by an author or author’s institution. Alternatively, researchers can make their scholarship openly accessible by depositing preprints of their manuscripts into OA repositories, making the manuscripts freely and publicly available. In most cases, these repositories are funded by researchers’ institutions and supported by libraries.

Thus, even as recently as a few decades ago, information was a salable commodity. But the economic and cultural shifts of the late 1990s and 2000s have altered this thinking. In the “new information order” of today, information service providers need to rethink their business models. Regazzi strongly suggested that content, which was once the highly profitable commodity of the information services industry, has lost its value; now, in order to be successful, companies must continually look for new ways to derive value from information. Likewise, the traditional notion of research and development, in which an R&D team creates a new product or service and then moves it to marketing and sales, is a dead model. Instead, customer insight is paramount. Regazzi emphasized that “we need to engage and empower customers in order to be successful.” Companies must get customer insight early to provide greater product differential and be more successful.

Product Development Strategies

Regazzi closed the webinar by discussing new product development. He presented an overview of four ways to develop new products as a 2 x 2 matrix.

Incremental improvements are as follows:

1. Selling existing products to more existing customers2. Selling existing products to new customers3. Selling new products to existing customers

The following is considered “the new new”:

4. Selling new products to new customers

In addition, he suggested thinking of product development and potential new information services in terms of uniqueness and value—specifically, consider “where you want your products to be and why” within the context of a second 2 x 2 matrix using the following categories:

1. Unique but not highly valued2. Not unique and not highly valued3. Highly valued but not unique4. Unique and highly valued

Regazzi argued that focusing on unique and highly valued products will help “distinguish against free” and differentiate against other products. If companies use a “freemium” model of sales, in which they give away some information for free but charge for other services or enhanced features, it makes sense to monetize the highly valuable and highly customized services.

Furthermore, when thinking about where companies get insight about unique ideas, Regazzi reiterated his earlier point: R&D is not the source of such insights. Instead, these insights should come from the segment of an existing userbase often referred to as “lead users” or “lighthouse customers”—users who face needs months or years earlier than others in the marketplace, although these needs generally become standardized across users later in time. This group often has the ability to create solutions on its own, but it doesn’t necessarily have the means to monetize them on its own. In short, this group serves as the predictor and purveyor of what will occur in the marketplace in the future. Tapping into the insights of lead users in particular can produce a tremendous strategic advantage.

Regazzi reiterated that the days of relying on R&D labs and moving new product development through a traditional chain are gone. Instead, successful organizations need to engage and empower customers. Regazzi ended on an upbeat note. He suggested a “very bright future,” one in which information service providers “need to think a little bit differently about how to add value.” For those organizations that are able to rethink value, “It will be a very bright future.”

Abby Clobridge is the managing director of Clobridge Consulting, a boutique firm specializing in knowledge management, information management, and open access. Abby has worked with a wide range of organizations throughout the world, including various United Nations agencies; colleges and research universities; nonprofit, intergovernmental, and multistakeholder organizations; the news media; and private sector companies. She can be found on Twitter @aclobridge.